The CFA Centre for Financial Market Integrity today outlined a new financial reporting model that would greatly enhance the ability of financial analysts and investors to evaluate companies in making investment decisions.

The Centre called on standard-setters, public companies, investors, and others to promote widespread use of these new recommendations to overhaul corporate financial statements.

“As businesses develop new products and services, the financial reporting model must keep pace to ensure that financial statements are relevant, clear, accurate, and complete,” said Rebecca McEnally, project director of the Comprehensive Business Reporting Model and director of the Capital Markets Policy Group for the CFA Centre, in a release.

McEnally today unveiled the financial reporting model at a joint meeting of the Financial Accounting Standards Board and the International Accounting Standards Board. The project culminates three years of research with input from a broad range of experts in financial analysis and investments.

Financial reporting and disclosure must provide all of the information that common stock owners need to evaluate their investments, McEnally said.

To accomplish this, the Centre’s report outlines 12 principles, among them:

  • A company’s financial statements must be prepared from an investor’s perspective.
  • A financial statement must include the economic impact of all of the company’s activities.
  • All changes in fair values of assets and liabilities should be recognized in the statement as they occur.
  • Changes affecting financial statements must be reported and explained in detail rather than in highly summarized categories.

“We invite financial officers and other senior executives to provide their experiences and insights to construct financial statements that will best serve investors,” McEnally said.

The Centre’s report also calls for broader, more comprehensive disclosures of material that appears in required filings and audited footnotes.

The CFA Centre develops timely, practical solutions to global capital market issues, while advancing investors’ interests by promoting the highest standards of ethics and professionalism within the investment community worldwide. It was established in 2004 by CFA Institute as a distinct unit with its own executive director and advisory council.